Rising cost-sharing for people with health insurance has drawn a good deal of public attention in recent years. For example, the average deductible for people with employer-provided health coverage rose from $303 to $1,505 between 2006 and 2017.
While we can get a sense of employees’ potential exposure to out-of-pocket costs by looking at trends in deductibles, many employees will never reach their deductibles and other employees may have costs that far exceed their deductibles. In addition to deductible payments, some employees also have copayments (set dollar amounts for a given service) or coinsurance payments (a percentage of the allowed amount for the service). To look at what workers and their families actually spend out-of-pocket for services covered by their employer-sponsored plan, we analyzed a sample of health benefit claims from the Truven MarketScan Commercial Claims and Encounters Database to calculate the average amounts paid toward deductibles, copayments and coinsurance.
We find that, between 2005 and 2015, average payments for deductibles and coinsurance rose considerably faster than the overall cost for covered benefits, while the average payments for copayments fell. As can be seen in the chart below, over this time period, patient cost-sharing rose substantially faster than payments for care by health plans as insurance coverage became a little less generous.
Deductible spending has risen while copayment spending has fallen
The MarketScan claims database contains information about health benefit claims and encounters for several million individuals each year provided by large employers. The advantage of using claims information to look at out-of-pocket spending is that we can look beyond the plan provisions and focus on actual payment liabilities incurred by enrollees. A limitation of these data is that they reflect cost sharing incurred under the benefit plan and do not include balance-billing payments that beneficiaries may make to health care providers for out-of-network services or out-of-pocket payments for non-covered services. We use a sample of between 933,000 and 14.8 million enrollees per year to analyze the change from 2005 to 2015 in average health costs for covered benefits overall, the average amount paid by health benefit plans, and the average amounts attributable to deductibles, copayments, and coinsurance. The analysis of costs for each year was limited to enrollees with more than six months of coverage during that year.
From 2005 to 2015, the average payments by enrollees towards deductibles rose 229% from $117 to $386, and the average payments towards coinsurance rose 89%, from $134 to $253, while average payments for copays fell by 36%, from $218 to $139. Overall, patient cost-sharing rose by 66%, from an average of $469 in 2005 to $778 in 2015. During that period, average payments by health plans rose 56%, from $2,932 to $4,563. This reflects a modest decline in the average generosity of insurance – large employer plans covered 86.2% of covered medical expenses on average in 2005, decreasing to 85.4% in 2015. Wages, meanwhile, rose by 31% from 2005 to 2015.
Individuals in the top 15 percent of health spenders (who together account for 75.1% of total health benefit costs for the sample), had substantially higher out-of-pocket costs, averaging $2,766 in 2015, including $1,302 in coinsurance payments, $1,006 in deductible spending, and $458 in copays. The growth in cost-sharing for this group was similar to the sample overall. As of 2015, 6.5% of all enrollees had deductible payments that exceeded $1,500 and 8.4% had overall cost-sharing payments that exceeded $2,500.
Deductibles account for less than a quarter of cost-sharing payments in 2005, but almost half in 2015
The relatively high growth in payments toward deductibles is evident in the changes over time in the distribution of cost sharing payments: deductibles accounted for 25% of cost sharing payments in 2005, rising to 50% in 2015. Conversely, copayments accounted for nearly half (46%) of cost sharing payments in 2005, falling to 18% in 2015. The increase in coinsurance over the period from 29% of total employee cost-sharing in 2005 to 33% in 2015 may reflect the strong growth over the period in plans that qualify a person to establish a health savings account; these plans are more likely to have coinsurance than copayments for physician services. Patients are more sensitive to the actual price of health care with deductibles and coinsurance than they are with copays, which are flat dollar amounts. The other difference between a copay and a deductible is that copays may add up over time, while a deductible may need to be met at once, causing affordability challenges.
While average payments towards deductibles are still relatively low in the context of total household budgets, they have increased quite rapidly. Deductibles are the most visible element of an insurance plan to patients, which may help explain why consumers continue to show concern about their out-of-pocket costs for care. Although health insurance coverage continues to pay a large share of the cost of covered benefits, patients in large employer plans are paying a greater share of their medical expenses out-of-pocket. And, while health care spending has been growing at fairly modest rates in recent years, the growth in out-of-pocket costs comes at a time when wages have been largely stagnant.